LBALUM: Improved Earnings Not Reflected in Share Prices

Results Update

For QE31/7/2019, LBAlum's net profit rose 72% q-o-q & y-o-y to RM4.6 million while revenue was mixed-  up 12% q-o-q but down 7% y-o-y to RM127 million. Revenue rose 12% q-o-q mainly due to higher sales volume. Profit from operations increased by 126.6% q-o-q in line with the increase in revenue. After accounting for a drop in the share of results from an associate which decreased from RM1.80 million to RM0.95 million and a net other operating expenses of RM37,000 as compared to net other operating income of RM235,000 in the preceding quarter, the Group’s profit before taxation and profit after taxation for the current quarter both increased by 72% q-o-q. (Note: My first post on this stock is here.)


Table: LBAlum's last 8 quarterly results


Graph: LBAlum's last 47 quarterly results

Financial position

LBAlum's financial position as at 31/7/2019 is deemed satisfactory with current ratio at 1.4x and gearing ratio at 0.7x.

Valuation

LBAlum (closed at RM0.51 yesterday) is now trading at a trailing PE of 9 times (based on last 4 quarters' EPS of 5.7 sen). At this PE, LBAlum is fairly valued.

Technical Outlook

Over the past 18 years, LBAlum seems to be range-bound with an upward bias. The current range would be between RM0.45 & RM0.90. Since the prices are nearer the bottom of the range and the earnings have improved over the past 5 quarters, there is a good chance that the share price has bottomed.


Chart: LBAlum's monthly chart as at Sep 30, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance & fair valuation, LBAlum could be a good stock for a recovery play. 

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.